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Complaints regarding equity release mortgages – with many consumers feeling that they were mis-sold to, and had lost money as a result, have been on the increase.

Here’s a guide, detailing the key signs of mis-selling, and how to tell if you have grounds to seek compensation.

The major signs of equity release mortgage mis-selling

Lack of information


It’s the financial advisor’s responsibility to provide clients with all the information they need to make an informed decision about an equity release mortgage. You have a right to know the following:

  • Whether you’ll be paying a fixed or capped interest rate.
  • How much the interest will compound by at the end of the term.
  • Whether there’s any option to repay capital as well as interest, which reduces the overall costs.
  • What will happen in the best / worst case scenarios (e.g. if the value of your home suddenly drops, or rises significantly).
  • What effect this will have on your benefits (e.g. Pension Credit, Jobseeker’s Allowance, Universal Credit etc., which are means tested).

No transparency regarding fees


You also have a right to know what fees are involved with taking out an equity release mortgage. For example, there might be a fee for making early repayments, or for setting up the mortgage in the first place. If you were charged fees that you weren’t informed about when you signed the contract, this is problematic.  

Targeting vulnerable individuals


The Financial Ombudsman Service has received several complaints about financial advisors targeting vulnerable older people, and encouraging them to take out an equity release mortgage when it might not have been in their best interests to do so. A financial advisor has a responsibility to act ethically and responsibly – and to ensure that the client fully understands what they’re agreeing to.

Being encouraged to borrow too much


Consumers have to pay interest for the money they release from their property. A financial advisor should make this clear, right from the start. If they did any of the following, it counts as mis-selling:

  • Encouraging you to borrow more money than you need (which will incur more interest over time).
  • Selling a ‘dream lifestyle’ (e.g. being able to go on expensive holidays or treat the family to days out), rather than promoting the equity release mortgage as something to be used only when necessary.
  • Failing to outline how much interest will be owed against the money borrowed.
  • Not assessing your unique financial situation, or discussing what amount would work best for you.

The possible future outcomes weren’t discussed


A financial advisor shouldn’t just focus on the immediate advantages of an equity release mortgage. They should also provide you with information about its implications for the future. In order to make an informed decision about the mortgage, you should discuss the following before agreeing the terms:

  • Who will be responsible for paying back the money in the event of your death?
  • What will happen if you or your partner need to go into residential care?
  • What will happen if your house suddenly depreciates in value?
  • What will happen if you come into money, and want to make an early repayment?

You weren’t offered a range of options


An equity release mortgage is just one of many options available to people over the age of 55. In some instances, it’s a sensible move; in other cases, it might not be as beneficial as other financial arrangements (e.g. freeing up cash by moving to a smaller home).

Your financial advisor should have taken the time to assess your personal circumstances, then recommended some options for you to consider. An equity release mortgage should never be presented as the only method of generating a lump sum of money.

The financial advisor exerted undue pressure when selling the product


A number of consumers have already complained to the Financial Ombudsman Service about feeling pressurised into agreeing to a financial product. Advisors are often incentivised to sell specific mortgages (which earn them higher commissions), and this can result in customers being sold products that aren’t suitable for their needs.

Mis-sold equity release mortgage – what to do

If it’s found that an advisor mis-sold a financial product, then the consumer is in a strong position to make a claim to compensate for their losses. The same is also true for people whose elderly relatives were mis-sold an equity release mortgage.

If you’re concerned that you might be a victim of mis-selling, it’s worthwhile getting in touch with an industry expert, as they’ll be able to provide you with information on what to do next.


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